Keith Gill, alias Roaring Kitty, faces a probe by regulators in Massachusetts over his trades in GameStop (NYSE:GME) stock.
Gill, who led the 2021 meme stock rally, recently bought a big block of GameStop common and options. He advertised the positions by posting them to X, formerly Twitter. He also showed a screenshot of his positions on Reddit’s Superstonks subreddit.
GME stock rose 5.5% on June 4 but fell slightly overnight. It was due to open this morning at about $26.80 per share, a market capitalization of $9.4 billion.
Bad Kitty?
The Massachusetts regulator said no more than that they’re looking into Gill’s activities.
Most stock manipulation cases involve insiders, but in recent years, regulators have been seeking cases online as well. In 2022, the Securities and Exchange Commission (SEC) charged eight online influencers. The complaint said they fed traders misinformation, amassing profits of $100 million. The charges were dropped in March.
Manipulation is more common in “penny stocks” with market caps under $1 billion since it doesn’t take much money to move the markets. But in the 2021 rally, small traders pushing stocks like GameStop, AMC Entertainment (NYSE:AMC) and Bed Bath & Beyond organized online, magnifying their influence.
While organized buying can lead to outsized gains, it can also lead to outsized losses. GME stock shot up in mid-May to as much as $65/share but fell to $18 within a week of that high.
Short sellers who know shares are trading above fundamental value, like Andrew Left of Citron Research, were burned in the 2021 run-up but are back again. He called GameStop a “cult stock,” more vulnerable to a fall now than it was because its price is higher. However, traders who got out of the 2021 rise in time are supportive of the latest move.
GME Stock: What Happens Next?
The first meme stock craze became the film Dumb Money, with Paul Dano playing Gill. Don’t expect a Dumb Money 2.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
